By  on May 17, 2018

The Russian economy is growing again — although more slowly — and consumers have reset their expectations regarding their consumption of what they want that’s within their means.That means cutting back on nonessentials, such as alcohol and ready-to-eat foods. But while consumers have become more value-conscious and a growing number are more prone to buying low-cost generic medications, many also said they plan to spend more on products they regard as important for their well-being. Priorities for increased spending pertain to healthful eating, such as fresh foods, well-being and personal enrichment.In a new report from the Boston Consulting Group called “Russian Consumers and the New Economic Reality,” the survey found that in the aftermath of the 2014-16 financial crisis, many Russians are ready to spend more on “goods and services that matter most to their quality of life.” And while their strong devotion to famous brands seems to be fading — with only 24 percent in the study saying that brands reflect on themselves and their values — most said brands are still important for certain categories such as retail, digital media and electronics.BCG surveyed nearly 4,000 consumers last year across different age groups, occupations and income levels across the country, and made some comparisons to results from the consultancy’s 2013 study. While 55 percent said they are hopeful about the future, that represents a sharp decline since 2013, yet that 55 percent level is in line with many advanced economies. Russia is still considered a developing country due to its outdate infrastructure and insufficient health care, but the spending priorities since the financial crisis have the consumers exhibiting the characteristics of buyers in more mature economies.Family and home at 83 percent and health at 78 percent were the top two priorities, ahead of freedom, prosperity and comfort. But even as they are willing to spend more on what they value, they also seem more rational about their purchases. Forty-six percent said “I am happy because I can buy new things,” while 28 percent said “The more I buy the happier I am.” That’s down from the 2013 responses at 60 percent and 42 percent, respectively. Further, 20 percent of consumers with monthly incomes of more than $1,700 in the 2017 survey, considered affluent in Russia, said they are cutting back, while 33 percent said they prefer to save rather than spend.More importantly, the study found that Russian do spend, “they still expect quality, regardless of where they shop or which brand they choose.”When it comes spending on apparel and shoes, 22 percent said they plan to spend more on these categories, while 55 percent said they want to spend more but must cut back to save. BCG concluded that Russian consumers have been postponing purchases in these areas and are ready to spend when they feel they can afford them. “This tells us that the companies in these categories that maintain a strong presence in the market could eventually capitalize on significant pent-up demand,” BCG concluded.Russia remains an important market for global firms, with $700 billion in goods and services consumer in 2016. It also is a heavy importer of finished goods, about $40 billion in goods from China and $20 billion in goods from Germany in 2016. Urban areas are where 74 percent of the population of 147 million resides, and some cities such as Moscow — 12.4 million residents — are among the richest, with $12,000 in per-capita income.According to BCG, all that means companies need to approach Russia differently from what they have done in the past. “They should develop more sophisticated, customized product and go-to-market strategies and a deeper presence on the ground,” the study concluded.BCG believes that Russia will remain a travel and tourism market for companies that bring the right value proposition. “Cost leadership and customer centricity will be among the key sources of advantage for travel companies seeking to capture the Russian growth opportunity,” said Nicolas Boutin, a BCG partner and global leader of the firm’s travel and tourism practice.

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